Indian residents are using cryptocurrencies to purchase goods and services domestically through overseas fintech platforms that convert stablecoins and other virtual digital assets into gift cards and vouchers. According to reports from The Times of India, these platforms, incorporated in Sweden, Germany and Singapore, allow users to send stablecoins from their private e-wallets to foreign entities, which then sell the cryptos abroad to settle payments with Indian voucher partners. The overseas platforms either maintain inventory of digital card codes or generate codes through technology tie-ups with Indian partners. Recent developments show that this mechanism enables Indians to buy groceries, fuel, mobile recharge, food delivery, and even gold within the country without local high street banks and tax authorities getting a whiff of it. The vouchers are closed-loop prepaid instruments issued by specific entities and can be used to make purchases from the brands and stores designated by them.
The payment mechanism has drawn regulatory attention over potential gaps in cross-border payment, tax and AML oversight. As reported by The Times of India, this procuring vouchers mechanism was recently brought to the notice of finance and home ministry by a blockchain research organisation advising law enforcement authorities. Sudhakar Lakshmanaraja, founder of Digital South Trust, stated that the scale and cross-border nature of these pathways merit further examination for their potential implications for regulatory oversight. According to Digital South Trust's key findings, the mechanism involves overseas crypto payment platforms accessible to Indian users with payment pathways involving local intermediaries and India-facing channels that enable crypto conversion into vouchers used for direct payments for goods and services. The mechanism also raises questions around India's existing framework for cross-border payments, with legal experts noting that crypto being used to achieve the same economic result outside banking system and its attendant checks requires express clarity under the forex framework.
One platform that issued over 16 million cards to Indian users offered a conversion rate of 88 - i.e, one USDT for ₹88 as compared to over 95 in India. According to industry sources cited by The Times of India, those shopping for jewellery to airline tickets with undisclosed cryptos wouldn't mind lower conversion rates generating platform margin. The cryptos are neither reported in I-T returns nor taxed, particularly if crypto source is suspect. The foreign platforms play an important role in this crypto-to-gift-card chain and make money from the conversion rate applied when crypto received from Indian users is converted into vouchers. Recent analysis shows that these instruments can't be used for third party payments and cash withdrawal, they have no monetary limits and are outside RBI regulation.
Recent developments show that crypto futures trading in India is surpassing spot deals, with traders drawn to potential profits and lower taxes. Futures volumes now exceed spot volumes significantly, and domestic platforms accept Indian rupees for margins with tax benefits as TDS is not applicable on futures transactions. According to a CoinSwitch survey ahead of the Union Budget, 61% of Indian crypto investors favour equity-like tax treatment and 17% prefer a separate framework, while 66% view the current regime as unfair. The Central Board of Direct Taxes is examining crypto derivatives and cross-border transactions, highlighting the growing regulatory focus on cryptocurrency taxation and compliance. A payment industry official noted that Indian users who are keen to avoid leaving a transaction trail would generally not withdraw their crypto from VDA wallets maintained with Indian exchanges, instead transferring the coins directly from private wallets to overseas platforms using blockchain-based pathways.
According to a payment industry official cited by The Times of India, if the intent is to find ways around laws of the land, there are ways to misuse the instrument because a gift-card code can be passed from one person to another. The industry is constantly trying to balance fraud prevention with ease of use, with controls as tight as Fort Knox potentially reducing ease and spontaneity of gifting. As reported by industry sources, the mechanism involves offshore platforms buying gift vouchers in bulk from voucher issuing and aggregator firms in India who act as partners, creating a closed-loop pre-paid card system outside traditional banking regulations. The foreign platforms sell the crypto received from Indian users overseas by their parent or associated company, with the proceeds used to make payments to Indian voucher partners, effectively round-tripping the cryptocurrency back into domestic purchasing power.
